Americas Roundup: Dollar rises modestly on rate hike bets, European worries, Oil little changed as growing U.S. supply offsets bullish Saudi comments-March 8th, 2017

Market Roundup

•    US trade deficit jumps to 5-yr high, -48.5b v -48.5b forecast, -44.3b previous; imports rise 2.3% v exports +0.6%.

•    US Redbook y/y +1% v 1.4% previous; m/m -0.8% v 0.7% previous.

•    New Zealand's Fonterra: Dairy prices fall 6.3%, with Avg selling price NZD 3,512/tonne, volumes +9% at auction.

•    Atlanta’ Fed’s GDPNow f/c for Q1 2017-0.5% to 1.3% from 1.8% on March 1, peaked at 2.7% in early Feb.

•    Pres Trump backs House Republican healthcare plan, aims to cut drug prices.

•    Germany’s Schaeuble: nobody can say Germany manipulates euro, meets US counterpart next week in Berlin.

•    Germany’s Schaeuble: Brexit negotiations complicated, main goal to keep remaining EU 27 together.

•    Dollar rises modestly on rate hike bets, European worries.

•    Fillon backers seek unity to revive French presidential bid, New poll again shows Fillon knocked out in round one.

Looking Ahead - Economic Data (GMT)

•    21:45 New Zealand Manufacturing Sales* Q4 2.10%-previous

•    23:50 Japan Bank Lending YY Feb 2.50%- previous

•    23:50 Japan Current Account NSA JPY Jan forecast 239.0b, 1112.2b-previous

•    23:50 Japan GDP Rev QQ Annualized Q4 forecast 1.6%, 1.00%- previous

•    23:50 Japan GDP Revised QQ* Q4 forecast 0.4%, 0.20%- previous

•    23:50 Japan GDP Cap Ex Rev QQ Q4 forecast 1.7%, 0.90%- previous

•    02:00 Japan Exports YY* Feb forecast 12.3%, 7.90%- previous

•    02:00 Japan Trade Balance USD Feb forecast 25.75b, 51.35b- previous

•    02:00 China Imports YY* Feb forecast 20%, 16.70%- previous

•    05:00 Japan Coincident Ind MM* Jan 0.1- previous

•    05:00 Japan Leading Indicator* Jan 2.6- previous

•    06:00 Japan Economic Watchers Poll SA* Feb 49.8- previous

Looking Ahead - Events, Other Releases (GMT)

•    No Significant Events

Currency Summaries

EUR/USD is likely to find support at 1.0543 levels and currently trading at 1.0570 levels. The pair has made session high at 1.0588 and hit lows at 1.0567 levels. Euro declined against the dollar on Tuesday as the dollar strengthened on expectations for a U.S. interest rate hike this month, backed by jitters about economic and political developments in Europe. The dollar also rose after data showed the U.S. trade deficit grew in January to its widest monthly level in nearly five years. The U.S. trade deficit jumped to a near five-year high in January as rising oil prices helped to push up the import bill, pointing to slower economic growth in the first quarter and posing a challenge for the Trump administration. The Commerce Department said on Tuesday the trade gap increased 9.6 percent to $48.5 billion, also buoyed by imports of cell phones and automobiles. That was the highest level since March 2012. When adjusted for inflation, the trade deficit rose to $65.3 billion from $62.0 billion in December. Investors are now awaiting non-farm payrolls data for February on Friday, seen as a key barometer of the U.S. economy. The monthly U.S. jobs report, due on Friday, is expected to show an increase of 186,000 jobs, probably enough to push the Fed to raise its base rate again for the second time in three months.

GBP/USD is supported in the range of 1.2165 levels and currently trading at 1.2203 levels. It reached session high at 1.2211 and dropped to session low at 1.2165 levels. Sterling declined against the dollar on Tuesday as sterling came under selling pressure as weak consumer spending data added to worries Britain's economy is slowing as it prepares to trigger divorce talks with the European Union. In the few months that followed Britain's vote to leave the EU last June, robust consumer spending had propped up the economy, surprising many economists. But the weak pound which has dropped nearly a fifth against the dollar since the referendum has contributed to a jump in inflation, and Tuesday's data from the British Retail Consortium and Barclaycard indicated consumers may now be feeling the pinch. Sterling fell as low as $1.2183 in morning trade in London before recovering to $1.2207 by 1756 GMT, still down 0.25 percent on the day. Domestic political developments have added to the negative sentiment around sterling in recent weeks, with talk of a fresh Scottish independence referendum, the collapse of Northern Ireland's government, and potential delays to Prime Minister Theresa May's Brexit plans all creating uncertainty for investors.

USD/CAD is supported at 1.3372 levels and is trading at 1.3413 levels. It has made session high at 1.3436 and lows at 1.3405 levels. The Canadian dollar held firm against its U.S. counterpart on Tuesday as Canadian dollar was supported by higher oil price and domestic data showed a third consecutive monthly trade surplus in January. Canada posted a third consecutive monthly trade surplus in January, the first such stretch since 2014, in another signal that the economy is gaining momentum after slumping for more than two years due to low oil prices. Statistics Canada on Tuesday reported a surplus of C$807 million ($602 million), which slightly exceeded analysts' forecasts of a C$700 million surplus. Statscan revised December's surplus sharply lower to C$447 million from an initial C$923 million. Oil prices were little changed on Tuesday, as growing U.S. production expectations offset earlier gains after Saudi Arabia's oil minister said market fundamentals were improving. The market, meanwhile, braced for U.S. crude inventory data later Tuesday that is forecast to show a 1.9 million-barrel build for last week, the ninth straight weekly increase in stocks that are already at record highs. The Canadian dollar was last trading at C$1.3416 to the greenback, or 74.56 U.S. cents, slightly weaker than Monday's close of C$1.3410, or 74.57 U.S. cents.

AUD/USD is supported around 0.7572 levels and currently trading at 0.7592 levels. It hit session high at 0.7611 and made session lows at 0.7583 levels. The Australian dollar declined against US dollar on Tuesday as the Australian dollar was weighted down by firmer dollar on Tuesday as traders anticipated high likelihood of a U.S. Federal Reserve interest rate hike next week. Australia’s central bank kept interest rates unchanged and showed no hint of considering another easing, underlining the outlook for steady policy. The Reserve Bank of Australia's (RBA) March policy meeting ended with rates unchanged at 1.5 percent as widely expected and the accompanying statement was generally upbeat. Last month, RBA Governor Philip Lowe said the market was "reasonable" to price in unchanged rates for all of 2017, arguing further cuts would only stoke a debt-fuelled bubble in house prices. The central bank has not shown any inclination as yet to tighten given underlying inflation and wages growth are running at record lows and there is plenty of slack in the labour market. The currency pair edged as high as $0.7618 after Reserve Bank of Australia's kept rates unchanged but declined as dollar demand increased across the board. 

Equities Recap

European shares fell on Tuesday as shares in big international drugmakers were hit after U.S. President Donald Trump tweeted about lowering drug prices.

UK's benchmark FTSE 100 closed up by 0.2 percent, FTSEurofirst 300 ended the day down by 0.20 percent, Germany's Dax ended flat, France’s CAC finished the day down by 0.5 percent.

U.S. stock prices closed lower on Tuesday as weakness in drug and financial shares sent the S&P 500 and the Dow Jones Industrial Average to their first consecutive sessions of declines in more than a month.

Dow Jones closed up by 0.15 percent, S&P 500 ended up 0.30 percent, Nasdaq finished the day down by 0.22 percent.

Treasuries Recap 

U.S. Treasury yields rose on Tuesday, with the 30-year yield at its highest level in over a month as skittishness that the Federal Reserve will raise interest rates next week led to a lackluster sale of $24 billion of three-year government notes.

On the open market, the yield on benchmark 10-year Treasury notes was up 2 basis points at 2.514 percent, while the 30-year yield was up nearly 2 basis points at 3.114 percent after touching its highest level since Feb. 3,  data showed.

Commodities Recap

Gold hit the lowest level in more than four weeks on Tuesday as the dollar strengthened and expectations for a U.S. interest rate hike this month weighed, though moves were muted ahead of U.S. payroll data this week.
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Spot gold was down 0.9 percent at $1,214.51 an ounce by 2:52 p.m. EST (1952 GMT), having touched its lowest since Feb. 3 at $1,213.65 an ounce. U.S. gold futures for April delivery settled down 0.8 percent at $1,216.10.

Oil prices ended little changed on Tuesday, as growing U.S. production expectations offset earlier gains after Saudi Arabia's oil minister said market fundamentals were improving.

Brent futures slipped nine cents, or 0.2 percent, to settle at $55.92 a barrel, while U.S. West Texas Intermediate (WTI) crude CLc1 lost six cents, or 0.1 percent, to settle at $53.14.